Micro-aspects of Monetary Policy: Lender of Last Resort and Selection of Banks in Pre-war Japan
This paper explores how the Bank of Japan (BOJ) dealt with the trade-off between stability of the financial system and the moral hazard of banks in pre-war Japan. The BOJ concentrated Lender of Last Resort (LLR) loans with those banks that had an established transaction relationship with the BOJ. At the same time, the BOJ carefully selected its transaction counterparts, and did not hesitate to end the relationship if the performance of a counterpart declined. Further, the BOJ was selective in providing LLR loans. Through this policy, the BOJ could avoid the moral hazard that the LLR policy might otherwise have incurred.
|Date of creation:||Nov 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.cirje.e.u-tokyo.ac.jp/index.html
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2006cf447. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CIRJE administrative office)
If references are entirely missing, you can add them using this form.